David Leary

A wide range of policy options, including a range of market-based mechanisms are available to governments to support the development of renewable energy. These options include provision of investment incentives such as grant programmes, tax measures such as investment and production tax credits, government procurement policies, and guaranteed price systems such as feed-in tariffs. More common mechanisms include various market-based schemes built around obligations to purchase renewable energy, including portfolio standard or quota systems, and a binding renewable energy target. All of these options are present in some form or other in various government responses to climate change and in efforts to promote the development of renewable energy across Australia. By far the most important of these mechanisms has been the Mandatory Renewable Energy Target (MRET) scheme established under the Renewable Energy (Electricity) Act 2000 (Cth). This scheme was originally established to spur investment in renewable energy generation in Australia. This chapter argues that this core policy objective has been undermined by a constant stream of government-sponsored inquiries, reviews and legislative amendments that have created uncertainty and undermined investor confidence in the renewable energy industry. This chapter argues that the Australian experience demonstrates a fundamental lesson that the best way to destroy, or at a minimum undermine, the effectiveness of a market-based mechanism is to create a continual climate of uncertainty through inquiries and reviews and numerous amendments to the scheme.

Evgeny Guglyuvatyy and Natalie P. Stoianoff

Australia had actively participated in the 1992 Earth Summit in Rio de Janeiro, endorsing the Summit goals that were formed by the desire for sustainable development. Australia also joined the United Nations Framework Convention on Climate Change and much later signed the Kyoto Protocol, enthusiastically supporting greenhouse gas reduction. A range of measures aimed at reducing Australia’s greenhouse gas emissions have been on the agenda at the federal and state level for the last two decades. Until recently, successive Australian governments have been committed to the introduction of a carbon tax or an emissions trading scheme designed to mitigate climate change. This chapter examines the historical progress of Australian climate change policy including the implementation of the present Australian government’s Direct Action Plan. The chapter in particularobserves several interesting and significant aspects of Australian climate law, highlighting governmental approaches and processes leading to the introduction of those laws.The historical perspective is necessary to identify most common features of the climate law implementation procedures and to identify what political factors influence these processes in Australia. Examination of the Australian climate change regime indicates how different actors influence policy proposals to achieve their own goals, rather than to cooperate in a process of generating the best overall legal option. This chapter concludes that the development of climate law in Australia required some innovative and responsive law initiatives. However, the practical implementation of various climate change laws had been constantly impacted by various economic and political factors.

Agime Gerbeti

The EU Emissions Trading Scheme (EU ETS), launched in 2005,has not achieved its goals. It has not been attractive to other geographic areas and global emissions have increased. Leaving aside the recession, Europe did not consume less but produced less, importing goods from emerging countries with high carbon intensity. In addition, CO2 permits reached a price level that has been insufficient to encourage research and investment. The ETS has become a kind of (low) negotiable energy tax burden on EU business competitiveness in a global market. The World Trade Organization (WTO) (and international policy opportunities) does not allow the imposition of an unjustified carbon border tax. For trading within the European market, the proposal in this chapter is to consider CO2 as a raw material used in the production of goods, regardless of where they are produced and enhance it in the quantity ‘contained’ in a single product as a result of the energy mix. The CO2 cost would be administered as a charge converging in value-added tax (VAT). This approach allows an enhancement of CO2, to be free from market fluctuations and from recession, if the CO2 cost is set at an appropriate level to encourage research and low-carbon investments in EU and non-EU territories. Because of the greater efficiency of the European energy mix it would also create competitiveness in the energy costs of production. This approach –adopted unilaterally by Europe – complies with WTO rules, as long as it allows industries outside the EU to demonstrate their production energy mix. If European standards are respected, industries would be exempted from the additional charge on emissions within the VAT. In the extremely complicated context of energy and industry – the United States moving towards energy independence thanks to shale gas; China and India increasing their market shares; Organization of the Petroleum Exporting Countries (OPEC) countries adopting ‘strong’ international policies on the cost of crude oil – Europe needs to take advantage of the low carbon intensity of its industrial system, especially now that the abandonment of free CO2 permits will inevitably increase production costs. This could be a way to create conditions for lower global emissions and increase environmental benefits faster than any global agreement.The aim is not to lower EU environmental objectives but to urge the rest of the world to follow Europe.

Jan Brůha, Hana Brůhová-Foltýnová and Vítězslav Píša

Transport emissions rose by 20percent between 1990 and 2010 and accounted for more than 20 percent of all GHG emissions in the EU; this indicates that the transport sector is the second biggest greenhouse gas-emitting sector after energy and the only major sector where greenhouse gas emissions (GHGs) are still rising or stagnating. Pricing policies in the transport sector are thought to be an important tool to reduce these global emissions and other pollutants from transport, either alone or as a part of a policy mix. Fuel excises in particular have a direct impact on the fuel efficiency of vehicles (which generally comes at a cost) and, indirectly, reduce mileage – and in this way reduce GHG emissions. The aim of this chapter is to analyze distributional effects of motor-fuel taxation on different kinds of households in the Czech Republic. Our detailed statistical analysis of microdata on households’ expenditures goes farther beyond the present knowledge because our focus is on different groups of households differentiated not only according to their incomes but also according to availability of vehicles, location of households and their size and other socioeconomic and demographic characteristics. First we describe the transport sector in the Czech Republic from the environmental point of view and discuss the impact of taxation on this sector. Then,motor-fuel consumption by various household groups is analyzed. We then apply a formal measure of motor-fuel tax progressivity on Czech data before drawing conclusions.

Sarah Wright

The first pollution laws introduced in the 1960s–70s were based on traditional command-and-controlregulation. More flexible and innovative instruments were introduced with reformed pollution laws in the1990s. The centrepiece of NSW’s pollution laws is the Protection of the Environment Operations Act1997 (NSW) (‘POEO Act’). The POEO Act and associated regulations provide the NSW EnvironmentProtection Authority (‘EPA’) with a number of economic tools to address pollution. This includesinstruments such as load-based licensing fees, risk-based licensing fees, tradable emission schemes,green-offset schemes, and monetary benefit orders. Those instruments have been utilized to variableextents. Some instruments such as monetary benefit orders, which require that a defendant pay back anyprofit they have derived from an offence, have not been used at all. Fines, which are offset by any profitsretained by the defendant, provide little, if any, deterrence to potential polluters. Other instruments such as tradable emission schemes have been employed in limited circumstances, namely for specific pollutantsand defined geographical areas. Economic regulatory tools have been received with mixed success and criticism. This chapter considers the extent to which economic instruments have been utilized in NSWpollution law as a regulatory tool that can aid environmental protection. Particular focus is placed on theuse of load-based and risk-based licensing fees, tradable emission schemes and monetary benefit orders. The chapter concludes that while economic instruments have the potential to contribute in an effective wayto the EPA’s regulation of pollution, some instruments seem to have been all but forgotten and othershave a number of potential weaknesses in their design. These factors may be negatively impacting on theEPA’s ability to effectively protect the environment.

Sally-Ann Joseph

It is now more than 20 years since the first call for action on climate change at the Earth Summit butthe scale of progress to date has been uninspiring. Numerous attempts have been made by the international community to negotiate a cooperative approach to tackling not only climate-related issues but also the funding to achieve these. It has been reiterated again and again that this needs to be viewed as both fair and feasible while consistent with the principle of ‘common but differentiated responsibilities and respective capacities’. The focus has remained solely and consistently on greenhouse gas emissions, particularly carbonrelated. Proposals to date have predominantly relied on pledges, that is, voluntary contributions or targets, which are also voluntary. Yet the issue is acknowledged to be broader than this, affecting ecosystems and biodiversity, land use changes and land management activities. Initiatives regarding international payments for ecosystem services are increasingly being adopted. The reduced emissions from deforestation and forest degradation (REDD) scheme is an example of an incentivized system but its focus is nevertheless still on reducing emissions. The concept of a ‘global natural resource consumption tax’, which we explore in this chapter, takes a holistic view of the environment and makes all nations accountable for their use of environmental resources.

Cristina Brandimarte

The global degree of carbon dioxide (CO2) concentration in the atmosphere has reached worryinglevels, continuing to rise along a steep upward trend.Stabilizing or even reducing CO2 concentration would require drastic global emissions abatement, considerably above 50 per cent. Such a great reduction, difficult to attain within a reasonable time horizon, would entailhuge costsfordevelopingcountries. Most recent guidelines suggest large-scale integrated approaches, combining measures to both strengthen efforts to reduce emissions and boost carbon sequestration.Among market-based instruments, literature indicates that carbon taxes are one of the most cost-effective for emissions reduction,in particular, upstream (or production-based) CO2 taxation,a tax levied the point of source, as it has low administrative costs and ensures great coverage. If imposed unilaterally,however, this kind of tax could entail significant economic costs, mainly through competitiveness losses, and could become environmentally ineffective due to carbon leakage phenomena.Literature then suggests as a viable alternative, the CAT (carbon-added tax), a downstream, or consumption-based, carbon tax. It has the advantage ofprotecting competitiveness of domestic producers, as it is levied on imports and reimbursed on exports. In this chapter, the implementation of a fuel-added carbon tax (FACT), a duty levied on fossil fuel embodied in goods and services and modelled after value-added tax (VAT), is considered and compared with the tax on fossil fuel purchases (FCT), the simplest and most common upstream carbon tax. In particular, macroeconomic effects of both taxes are estimated for Italy. The chapter also briefly reviews characteristics and implications of production-based carbon taxes; examines downstream taxation and describes the FACT; deals with differences between FCT and FACT both from a theoretical and empirical point of view. In particular, the effects of their implementation in Italy are analysed and compared. A technical appendix on FACT simulation follows the conclusion.

Reform, Innovation and Renewable Energy

This timely book focuses on achieving a sustainable future through the reform of green fiscal policy. Green fiscal policies help not only provide the needed financing but may also serve the Sustainable Development Goals adopted by the United Nations in 2015. In this volume environmental tax experts review the development of fiscal carbon policy, consider the impact of green taxation on trade and competition, analyse the lessons learned from national experiences with fuel and energy pricing, and evaluate a variety of green economic instruments.

Jian Wu, Xiao Wang and Zhe Yang

Environmental tax reform is now accelerating in China. Most existing studies on environmental tax policy design focus on national- and regional-level impacts, but it is crucial to understand the impact of different policy designs at the enterprise and industry level, since their choice and behavior change has a fundamental impact. This chapter uses enterprises’ relative efficiency as the proxy for enterprise competitiveness, and estimates the potential change of enterprise competitiveness under different policy scenarios using the DEA-RAM model. By observing these changes and their directions, we are able to work out enterprises’ behavior choices under the policy scenarios.This chapter creates a combination of three scenarios of environmental tax, production and emissions, to analyze the impact of environmental tax on enterprises’ production and emissions behavior. This chapter uses the DEA-RAM model to estimate the change of relative efficiency of enterprises. This model allows us to involve negative output (e.g., emissions), and give more flexibility on the sample size, so it is more applicable to achieve the objectives of this study. The chapter presents the following findings. (1) The current pollution fee policy is inefficient; its poor enforcement weakens the incentive for enterprises to adjust their behavior. (2) Enterprises with different ownership and scales perform with great discrepancy in different industries. (3) Carbon tax demonstrates a strong incentive to stimulate the production behavior change of enterprises while for companies with good potential of fuel substitution emissions tax may stimulate more pollutant reduction. In light of these findings we provide somerecommendations for policy reform.